LONDON (AFP) — The Bank of England said Tuesday that, for the second week in a row, it had received no bids in an auction for 10 billion pounds (20 billion dollars, 14 billion euros) of emergency liquidity.
The BoE has pledged to inject liquidity into the three-month interbank money market in the wake of a financial crisis at troubled British lender Northern Rock.
The failed auction was at a penalty rate above the BoE's key lending rate of 5.75 percent. Any loans, including interest, would have had to be paid back after three months.
A media report published Tuesday suggested that British commercial banks were seeking extra emergency funds from the European Central Bank (ECB) instead of the BoE.
The Daily Telegraph reported that British lenders are seeking extra liquidity from the Frankfurt-based ECB because they are "taking advantage of much lower interest rates and guaranteed anonymity."
Over the past two months, commercial banks have become nervous about lending cash to each other due to concerns over their exposure to the crisis-hit subprime home loan sector in the United States.
Northern Rock was forced in September to request emergency assistance from the British central bank as credit markets dried up. The bank was reported to have borrowed about 8.0 billion pounds at a penalty rate from the BoE.
The BoE has said it wants to address long-term liquidity issues in the so-called interbank market -- where commercial banks lend to each other.
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